IMF's Lagarde voices concern over global economy

The head of the International Monetary Fund expressed concern on Friday at a deterioration in the global economy, saying the outlook has become more worrying as developed and big emerging nations show signs of slowing down.

The comments by IMF Managing Director Christine Lagarde came after the European Central Bank, the Bank of England and China’s central bank all eased monetary policy in a sign of the growing alarm over the health of the world economy.

Financial markets will be glued later on Friday to news of US jobs data for the month of June for the latest sign on the health of the world’s biggest economy, which has shown signs of losing momentum.

China, the world’s second-biggest economy, releases a raft of data next week, including on second-quarter GDP.

“In the last few months, the global outlook has been more worrying for Europe, the United States and large emerging markets,” Lagarde said in a speech in Tokyo.

The IMF will downgrade some of its economic forecasts later this month as economic data from major and emerging economies has deteriorated in recent months, she said.

“The IMF’s forecasts are likely to be lower than our previous forecasts.”

The IMF will publish an update to its World Economic Outlook report on July 16.

She welcomed growing cooperation in Europe to tackle the sovereign debt crisis but said that further fiscal cooperation was needed.

In the IMF’s April report, it revised upward its global growth forecast for this year to 3.5 per cent from 3.3 per cent in January, and to 4.1 per cent for 2013 from 3.9 per cent previously.

Lagarde acknowledged that the two main concerns for Japan’s economy were a further appreciation of the yen and risks posed by Europe’s debt crisis to demand for Japanese exports.

The yen is moderately overvalued and there is a risk it could rise further if Europe’s debt crisis spurs a flight away from riskier assets, she said.